JD Health International, the online health-care arm of JD.com (9618), is reportedly planning to go public in Hong Kong as soon as next month with the aim of raising about US$3 billion (HK$23.4 billion).

The Bejing-based company has obtained listing approval from the Hong Kong stock exchange last week.

Founded in 2014, the startup intends to use the net proceeds from the initial public offering for business expansion and research and development, as well as potential investments, acquisitions or strategic alliances.

JD, China's No 2 e-commerce giant, controls an 81.04 percent stake in JD Health and will hold not less than 50 percent shares after the spinoff, according to its September statement.

The IPO came during an out-performance of mainland digital health-care stocks as the Covid-19 pandemic boosts China's tele-medicine industry, which connects millions of patients to doctors amid lockdowns and social distancing measures.

More than 11,000 digital health-care companies were established in the first quarter, says a Frost & Sullivan report. The online health-care market is expected to quintuple to 1.13 trillion yuan (HK$1.32 trillion) by 2024 from 2019, and further surge 3.7 times to 4.22 trillion yuan by 2030, the report says. So far this year, JD Health's major domestic counterpart - Alibaba Health Information Technology (0241) - has seen shares jump 1.4 times. The other top-three player - Ping An Healthcare and Technology (1833), controlled by Ping An Insurance (2318) - surged 80 percent. WeDoctor, under Tencent (0700), is said to be eyeing a Hong Kong public sale to raise US$1 billion.

JD Health was the largest online health-care platform and the largest online retail pharmacy by revenue in China last year, according to F&S. It had 72.5 million annual active user accounts for the year ended June.

The unicorn is targeting a valuation of about US$20 billion, said IFR's report.

Three months ago, the startup was valued at about US$12 billion when it raised US$914 million from the series B round financing led by Hillhouse Capital. That compared to Alibaba Health's market cap of HK$273 billion, and Ping An Good Doctor's HK$119 billion.

JD Health's revenue rose 32.7 percent year-on-year to 10.84 billion yuan in 2019 and jumped more than 75 percent to 8.78 billion yuan in the first half. Despite being favored by investors due to the tele-medicine concept, JD Health mainly made profits from sales of pharmaceutical and health-care products, which contributed more than 87 percent of revenue in the first half.

The company runs the retail pharmacy business through offline sales under JD Pharmacy brand, as well as an online marketplace and omnichannel initiative.

Leveraged on JD's nationwide logistic network and e-commerce platform, JD Health had 11 drug warehouses and more than 230 other warehouses, with more than 9,000 third-party merchants on its online marketplace in June. JD's omnichannel business also enables it to deliver medication within one day - even 30 minutes - in more than 200 mainland cities.

JD Health also generated revenue from commissions and platform usage fees from third-party merchants, as well as advertising service fees from suppliers and third-party merchants.

It provides online health-care services, including online consultation and prescription renewal, chronic disease management, family doctor and consumer health care.

In the first half, the company had about 90,000 online consultations a day on average, almost six times of that a year ago.

JD Health had more than 65,000 in-house and external doctors as of September 20. Users can make appointments and pay for services such as general physical exams, aesthetic medicines, dental care, vaccination appointments, genetic tests and Covid-19 test.

JD Health incurred a loss of 971.8 million yuan in 2019, compared to a profit of 214.9 million yuan in 2018.

First-half loss reached 5.4 billion yuan, compared to a profit of 236.3 million yuan a year ago. It was primarily attributed to an increase in the fair value of series A preference shares as a result of an increase in equity value. JD Health expects its 2020 net loss will increase due to fair value changes after issuing additional convertible preferred shares in August.

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